WorkCover have announced the most significant changes, to how Workers Compensation premiums are calculated, since in 1987. Although the premium formula has had some variations over the years, the new premium calculator will be completely different. The emphasis will be on return to work, and will focus on what employers can influence and control rather than other costs that an employer cannot change. The objective is for a fairer, more stable and easier to understand premium system that compares an employer to how they are performing against the scheme average. The focus is on an early return to work and prevention of injuries in the workplace to reward the employers financially. The two key changes to the premium calculation are:
- To shift from total cost of claims to focus on the wages paid
- A calculation of paid costs rather than estimated costs
- How will Workers Compensation premiums be calculated?
The initial aspect of the premium calculation will still be wages multiplied by an employer’s Industry Classification (WIC) which results in the Average Performance Premium (APP). This was previously known as the Basic tariff Premium. This will provide the initial band that an employer will fall into and will also determine the potential discount or penalty loading to be applied depending on the employer’s performance.
In 2014 WorkCover implemented the Employer Safety Incentive (ESI) for small employers which provided a 10% discount if all of their injured workers returned to work within 4 weeks. This incentive is now being extended to medium and large employers. The incentive is effectively a percentage discount off the Average Performance Premium at the commencement of the policy year.
Premium adjustments will occur at the end of the policy year and will only be adjusted to reflect any fluctuation between the actual and estimated wages. This will give much needed certainty to employers for budgeting purposes.
Employers will be able to access a Return to Work Incentive (RTWI). This will be a reward to employers who return injured workers back to the workplace. It is applicable for claims after 30th June 2015. It will provide an incentive by way of a percentage discount at the individual claim level. Here is a summary of the potential discounts:
Return to work incentive
0 - < 13 weeks
15% reduction in paid weekly claims assessment
13 - < 26 weeks
10% reduction in paid weekly claims assessment
26 - < 52 weeks
5% reduction in paid weekly claims assessment
Claims Costs will change significantly and estimates will no longer apply to the cost of claims that will be applied to premium calculations. The predominant cost that will be included for premium calculation purposes will be the paid weekly compensation. This is another incentive for employers to get injured workers back to the workplace. Those who return workers back quickly and successfully will be rewarded and those that do not will be penalized.
The Apprentice Incentive Scheme continues to be available to all employers. Under this scheme, if you employ an apprentice then you're entitled to a premium reduction based on the wages paid to your apprentice.
What can Employers do to reduce their premiums?
- Return to work is the key- Emphasis must focus on getting injured workers back to work either at same workplace or elsewhere as quickly and safely as possible.
- Invest in Risk Management, safety and training- The new system gives employers incentives to spend money on prevention which were not previously available.
- Review your Workers Compensation processes and resources- Do you have the right people and assistance to operate in the new environment?
The use of a Workplace Rehabilitation Provider as a facilitator of early return to work plays an even more important role in reducing the cost of premiums. Using an experienced and trained health professional to navigate the RTW process is essential to receive a quick and durable RTW outcome. There is a strong incentive for employers to achieve early return to work and then maintain suitable employment to receive further cost savings. As highlighted, medical, workplace rehabilitation and legal expenses are no longer included in the cost of claims and future liabilities in the form of claims estimates have been removed altogether.
Free services under workers compensation we can now assist with include:
- Workplace assessments and documenting the suitable duties
- Functional Capacity assessments
- Attending case conferences with the NTD and treaters
- Managing the RTW communication and coordination
- Vocational Assessments and job placement into new employment
- Psychological assessment and treatment services (including pain management)
- Occupational Therapy assessments (such as home and driving assessments) and treatment
Mend has been assisting business in the building industry for over 25 years and can assist in the provision of the above services, call 1300 176 774.
Fiona Curdie-Evans, Managing Director Mend Services
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